Pet Insurance: A Growing Employee Benefit. But Is It Worth It?

Richard J. Archer

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Pet insurance offers financial protection from unexpected costs related to accidents and illnesses with your furry family member. The coverage can be customizable, but that also means premiums can be high and insurable events might be limited in scope. More companies now offer pet insurance as a perk which can make it a worthwhile add-on when going through open enrollment if you are a pet owner.

There was a pandemic-induced pet boom in the United States. According to a survey by the American Pet Products Association in early 2022, “ruffly” one in seven respondents said being stuck at home during the COVID-19 outbreak led them to get a new pet.

What’s more, spending on our furry family members has gone through the roof. According to The Wall Street Journal, the U.S. Bureau of Economic Research revealed that by Q2 2022, inflation-adjusted spending on pets and related products catapulted 28% compared to pre-pandemic levels – that’s a beefier rate jump than what consumers doled even out for costly groceries. There is no doubt that more people have another mouth to feed under their roof.

A vet provides services to a dog in his office that will be reimbursed by pet insurance.
Image Credit: Depositphotos.

Pet Insurance: An Emerging Employee Benefit

More families also realize that health bills for Fido are not insignificant either. Pet insurance has become a hot market. It is also the fastest-growing employer-offered benefit out there, and we are starting to see more innovative companies provide this perk to their workers. But what exactly is pet insurance and is it worth it? Like all things money, we must weigh the costs and benefits. Above all, your situation matters most.

What Is Pet Insurance?

Pet insurance covers medical expenses including routine and preventative care, accidents, illnesses, and prescription medications. It’s common for a plan to have an annual reimbursement limit, a yearly deductible, and a reimbursement percentage.

A policy can insure against the gamut of possible mishaps with any kind of pet, but you can also purchase what is known as accident-only coverage that limits the scope of insurable events to cut down on monthly premium costs. Also keep in mind that some plans have exclusions and limitations for pets with preexisting conditions or those that require specialized treatments.

Bear in mind that pet insurance typically does not reimburse for experimental treatment, nutritional supplements, grooming services, non-health costs (think licenses and recordkeeping), and some pre-existing conditions. Spay and neuter surgeries are often not included under the coverage umbrella either.

It’s reported that just under 4 million cats and dogs are covered by a policy as of 2022. Still, while that’s up a whopping 28% from a year earlier, it is a paltry figure considering that 70% of American households own a pet – 69 million families have a dog while 45 million households call a cat family, according to the American Pet Products Association.

Why do so few pet owners purchase insurance? It’s seen as expensive when buying it on your own, but also not many people even know there is a big market for it. We recommend clients learn what’s all in a policy, then price it out to understand the costs and potential benefits. Let’s talk about that.

How Much Does Pet Insurance Cost?

At around $600 in total annual premiums, insuring your dog may appear palatable. Cats are cheaper with an average yearly accident and illness plan running around $350. So, that is between $30 and $50 in monthly premiums, and accident-only plans are slightly less than half that. Of course, specific breeds of dogs and cats will have different insurance costs and where you live makes a difference in what you pay.

Common deductible amounts range from under $100 to $1,000 or more. What’s unique about pet insurance, though, is that on top of an annual deductible expense, you might face what’s known as a ”per-condition deductible.” That outlay is specific to each pre-existing condition your pet has.

Next, the pet owner must choose a reimbursement level. Typical percentages range from 70% to 90%, but some insurance companies simply reimburse 100% of vet costs (that may come with higher premiums).

Finally, a max reimbursement dollar figure is included in the pet insurance policy – we find that $5,000 is a common amount. Top-tier plans may not have a cap, but those also come with bigger price tags.

Is Pet Insurance Worth It?

That’s a lot of dollars and cents and plan rules – figuring out if pet insurance is worth it might seem hazy still. The good news is that costs can be much cheaper if your employer offers pet insurance as an employee benefit. You might have to pony up just a few dollars a month in premiums, in which case it is certainly a great deal – particularly if you have a large dog. Males also cost more than female pets.

It’s also important to recognize that buying pet insurance sets you back more the older your pet gets. A pup’s plan could be just $30 per month, but as he or she gets more gray whiskers, the premium climbs. By late life, say 12 years old, the premium could be near $150. So, starting coverage early is usually worth it if you are purchasing a plan with varying premium amounts – the monthly cost is a lot more affordable when Lassie is just three months old versus 10 years old.

It really boils down to how comfortable you are with paying for perhaps inevitable significant one-off bills. If you keep a sizable emergency fund, then that might suffice for self-insurance. Also, you might find premiums just too pricey if you have a dog who is older with pre-existing conditions, but a partially subsidized policy offered as an employee benefit through work could change the calculation.

Let’s run through a quick scenario to help drive home the point:

Suppose you pay $100 each year for five years for a pet insurance plan through your employer (with the company footing a chunk of the premium’s cost). That’s $500. Up until now, you’ve had small costs that haven’t surpassed the annual deductible. Then your pet has a major accident or maybe requires surgery. Related vet bills sum to $5,000.

With a $500 deductible and 80% reimbursement level, your out-of-pocket cost is $1,400 ($500 deductible + 20% of $4,500). Avoiding the $3,600 cost makes those small premium payments worth it, whereas buying a private pet insurance policy might not have made sense.

Pet Insurance Pros & Cons

There’s certainly some financial protection and peace of mind knowing you have kept a leash on possible costs. Moreover, you might opt for better health care for your pet if you know you will not be saddled with high vet bills. Still, total costs tally up, and a policy’s limits and exclusions must be well understood before inking a policy. Finally, don’t discount the hassle of restrictions on claims and then the potentially time-consuming process of actually filing a claim. All of these pros and cons must be considered so that you make an informed decision as a consumer and pet owner.

Is Pet Insurance Right for You?

Pet insurance is the fastest-growing employee benefit out there. Many firms now offer it to their workers at a lower cost than what you might encounter if you were shopping around on your own. It is important to always weigh the costs and benefits along with your situation. If you have a pet – particularly an older one – and you can get inexpensive insurance through your work, it could be a no-brainer. Still, carefully assessing the pros and cons is needed. And if you have a pet, keeping your cash and liquidity reserve a bit higher is a prudent move.

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This article reflects the insights and opinions of its author and is not a recommendation or endorsement of their views or services.

About the Author

Richard J. Archer, CDAA, CFA, CFP, MBA

Investment Management & Financial Planning for Busy Professionals

Richard Archer, CDAA, CFA, CFP is a financial advisor based in Austin, Texas, who serves clients nationwide.

Get to know Richard by visiting his profile page on Wealthtender or visiting his website at

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.

To make Wealthtender free for readers, we earn money from advertisers, including financial professionals and firms that pay to be featured. This creates a conflict of interest when we favor their promotion over others. Learn more. Wealthtender is not a client of these financial services providers.
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